Associated Corporations - Act Part 11, Section 95
This section explains the director’s right to treat associated businesses as “one employer” for the purposes of the Employment Standards Act.
95. If the director considers that businesses, trades or undertakings are carried on by or through more than one corporation, individual, firm, syndicate or association, or any combination of them under common control or direction,
(a) the director may treat the corporations, individuals, firms, syndicates or associations, or any combination of them, as one employer for the purposes of this Act, and
(b) if so, they are jointly and separately liable for payment of the amount stated in a determination, a settlement agreement or an order of the tribunal, and this Act applies to the recovery of that amount from any or all of them.
The director will associate individuals, firms, corporations, associations, syndicates and societies or any combination of them in order to collect outstanding wages under the Act. The decision to associate legal entities under section 95 is dependent on the facts of each individual situation.
The director may treat corporations or any other business entities as one employer under the Act. This may include individuals, firms, corporations, associations, syndicates and societies or any combination of them. There must be a relationship among the parties that makes it appropriate that they be made jointly responsible for the payment of wage claims.
There are four conditions must be met when associating related businesses as “one employer” for purposes of the Act, as set out in this section:
These conditions are:
1. there must be more than one corporation, individual, firm, syndicate, or association;
2. each of these entities must be carrying on a business, trade or undertaking;
3. there must be common control or direction; and
4. there must be some statutory purpose for treating the entities as one employer
If associated, the individuals, firms, corporations, associations, syndicates or societies are all individually and collectively liable for amounts set out in a determination, settlement agreement or order of the tribunal and the Act applies to recovery from any or all of them.
When businesses are associated under this section of the Act, collection of outstanding wages can be pursued, for example, against one, two, or all three companies, as applicable, or a combination of any of them, to satisfy the amount outstanding.
The following four questions will be considered when determining if there is an association between business entities under this section of the Act:
- What is the business, trade, or undertaking?
The nature of the businesses must be determined to ensure that each entity is carrying on a business, trade or undertaking.
- Is the business operated by or through more than one corporation, individual, firm, syndicate, or association, or any combination of them?
The entities associated can be one or more of many types, including:
- individual proprietors
Any changes that occur in the relationships among the entities after the wages should have been paid are irrelevant as to whether or not they can be associated for the purpose of collecting the unpaid wages.
A contractor operates a hotel business, owned by DEF Company. Financing is provided by DEF Company, which owns all assets and has input into the operation of the hotel. The contractor has no assets. The hotel business is being operated under the common direction of DEF Company and the contractor. The contractor dies and the hotel closes. DEF Company can be associated with the contractor for purposes of the Act.
- Are the entities to be associated under common control or direction?
“Control” refers to the financial and legal arrangements that govern how the entities operate.
“Direction” refers to the way in which the people operating the business direct how things should be done.
In determining common control or direction, the following aspects are relevant:
- ownership of the entities
- ownership of physical assets
- degree of integration of operations
- common (or partially common) directors and officers
- day-to-day direction of employees
Two companies are involved in the operation of a shoe manufacturing plant. DEF Company owns the land and buildings, while MNO Company employs the employees, who operate machines leased from DEF Company. The husband is the sole director of DEF Company and the wife is the sole director of MNO Company. The shoe plant closes. DEF Company and MNO Company can be associated for purposes of the Act.
- Is there an employment standards purpose for associating the entities as one employer?
To associate the entities, there must be an employment standards purpose. The need to enforce minimum standards or protect employee wages meets this requirement.
Issuing a Determination
One determination can be issued showing any number of associated entities as the “employer”.
If a determination has been issued against one entity, and a further determination must be issued associating it with other entities for the same wages, the new determination will name only the previously unnamed entities.
Under these circumstances, the associated status of the original employer must be indicated in the written reasons of the new determination.
The director's lien attaches to the assets of all associated entities and their corporate officers and directors (see s.87 of the Act).
Employment Standards Tribunal Decisions
Invicta Security Systems Corp., BC EST #D349/96
Carestation Health Centres (Seymour) Ltd., BC EST #RD106/10
Related sections of the Act or Regulation
- s.1, Definition, “employer”
- s.78, Settlement agreements
- s.79, Determinations and consequences
- s.85, Entry and inspection powers
- s.87, Lien for unpaid wages
- s.91, Determination or order may be filed and enforced as judgment
- s.92, Seizure of assets
- s.96, Corporate officer’s liability for unpaid wages
- s.122, Service of determinations and demands